VDIS II: Tax evaders beware, this time you're sure to get the baton

Team ET, TNNMay 28, 2004, 03.57am IST

New Delhi: A second voluntary disclosure of income scheme, distinctly different from VDIS 1997, may be on the cards. The scheme, which could be announced in the 2004-05 budget, would be cast in a way to ensure that it "does not penalise honest tax payers and privilege evaders".

The introduction of special schemes to unearth black money figures in the agenda of the common minimum programme of the United Progressive Alliance (UPA). VDIS 1997, the tax amnesty scheme launched by P Chidambaram during his stint as the finance minister in the United Front government, drew flak from several quarters as it was seen to legitimise money laundering. It was also perceived to be unfair to tax payers who forked out taxes at much higher rates in the previous years.

The Supreme Court later directed the government not to launch such tax amnesty schemes. "But the new government has the leeway to announce a scheme whose features are completely different from VDIS or other amnesty schemes", reckon experts. Congress party sources were emphatic that the government would not use coercive methods to unearth black money and would also ensure that honest tax payers are not penalised.

While the United Front government had expected to rake in huge amounts from VDIS 1997 — though no official projections were given — it ended up mopping up around Rs 9,000 crore as tax. Disclosures topped Rs 33,000 crore.

There was a rush for declaring jewellery, particularly silver by individuals. A 30% tax was paid on acquisition value, which made the effective tax rate very low.

Before VDIS 1997, there were five other tax amnesty schemes which together yielded a meagre Rs 780 crore.

Another scheme which followed was the Kar Vivadh Samadhan scheme which was meant to unlock thousands of crores locked up in litigation. Though the tax payer was given a chance to settle the dispute and close the case, there were hardly any takers for the scheme.

Currently, disputed arrears have topped Rs 80,000 crore. Sources in the Left party reckon that a speedy settlement of cases would result in the unlocking of disputed arrears — which virtually doubled during the regime of the previous BJP led government. Although the previous BJP-led government announced the setting up of a National Tax Tribunal to expedite cases, it has been challenged in courts.